ACFE Fraud Prevention & Deterrence 5 — Questions and Answers
Question 1: Which internal control activity is the MOST fundamental for preventing asset misappropriation?
- Segregation of duties (Correct answer)
- Insurance policies
- Bonding of employees
- Frequent management meetings
Correct answer: Segregation of duties
Segregation of duties ensures no single employee controls all aspects of a transaction, making it much harder to commit and conceal asset misappropriation.
Question 2: Why is it important for organizations to publicize disciplinary actions taken against fraud perpetrators?
- To satisfy external audit requirements
- To reinforce deterrence by demonstrating real consequences (Correct answer)
- To comply with SEC disclosure rules
- To reduce insurance premiums
Correct answer: To reinforce deterrence by demonstrating real consequences
Publishing outcomes (appropriately and lawfully) demonstrates that fraud has real consequences, strengthening the deterrent effect on other employees.
Question 3: An employee is caught submitting personal expenses on a company credit card. The manager quietly returns the money and takes no further action. What fraud prevention principle does this violate?
- The need for forensic analysis
- The principle of consistent and transparent enforcement (Correct answer)
- The requirement to file insurance claims
- Mandatory external audit referral
Correct answer: The principle of consistent and transparent enforcement
Handling fraud quietly without formal action violates consistent enforcement, which is essential for maintaining credible deterrence and fairness.
Question 4: What is the primary goal of a fraud awareness training program?
- To train employees to conduct internal investigations
- To help employees recognize red flags and understand reporting channels (Correct answer)
- To certify employees as fraud examiners
- To replace internal audit functions
Correct answer: To help employees recognize red flags and understand reporting channels
Fraud awareness training helps employees spot warning signs of fraud and know how and where to report suspicions, increasing the likelihood of early detection.
Question 5: Which situation represents a classic 'opportunity' factor that enables occupational fraud?
- An employee is going through a divorce
- A single employee both approves and processes vendor payments (Correct answer)
- An employee believes management is dishonest
- An employee wants a lifestyle beyond their salary
Correct answer: A single employee both approves and processes vendor payments
When one employee both approves and processes payments, they have unchecked access and control, creating a clear opportunity to commit and conceal fraud.
Question 6: According to the ACFE, which industry tends to have the highest frequency of occupational fraud cases?
- Healthcare
- Banking and financial services (Correct answer)
- Government and public administration
- Manufacturing
Correct answer: Banking and financial services
Banking and financial services organizations are frequently the most-reported industry in ACFE fraud studies due to the high volume and liquidity of assets handled.
Question 7: A company conducts an annual 'fraud risk workshop' with department heads to identify emerging schemes. This practice BEST exemplifies which step in fraud risk management?
- Fraud investigation
- Ongoing fraud risk assessment (Correct answer)
- Reactive fraud response
- Compliance reporting
Correct answer: Ongoing fraud risk assessment
Regularly convening stakeholders to identify new fraud risks is an example of ongoing, proactive fraud risk assessment embedded in normal business operations.
ACFE Fraud Prevention & Deterrence 5
Which internal control activity is the MOST fundamental for preventing asset misappropriation?